Let Enron be a lesson to us all: There is plenty of room for governance improvement in most companies. Focus on these six key issues to enhance the effectiveness of a board.

• Author: Ames, B. Charles
• Position: Board Practices

IT IS STILL WAY TOO EARLY to conclude precisely what caused the Enron debacle -- the largest corporate failure in the history of the planet. Nevertheless, it is clear that the executives, analysts, auditors, and directors involved have a lot of explaining to do as they try to describe what happened.

Having spent three decades on corporate boards, I'm particularly interested in what Enron's colossal failure suggests about the role of its board in providing effective corporate governance. Enron's collapse should sound a wake-up call that makes everyone reconsider precisely what constitutes effective governance by boards of directors. It is not too soon to point to some specific problems at Enron that suggest lessons for all of us.

Clearly, Enron's board was no model of independence. As the New York Times has noted, many outside Enron directors had cozy relationships with the company. Enron paid consulting fees to some directors and made donations to the institutions that employed others. In my judgment, this is a classic red flag in any board structure, and one that should become even more disconcerting following Enron's implosion. How can any outside director really act and think independently if he or she is beholden to the management?

It is also alarming that the board seems to have condoned Enron's culture of nondisclosure. Enron was the ultimate "trust me" company and I would think the board could have done more to show its distaste for such CIA-style secrecy. Enron board members should have felt exceedingly uncomfortable voting on important corporate matters in what appears to have been an information vacuum. I wonder how the board reacted when, on a conference call, then-CEO Jeffrey Skilling used a vulgarity in response to an analyst who requested information that other companies routinely disclose. For all I know, the board may have chastised Skilling for such outrageous conduct, but judging from the mess that has ensued, it is not obvious that this was the case.

It would be a mistake to blame Enron's problems solely on a lack of effective corporate governance. However, published reports and news items certainly raise questions about the effectiveness of Enron's board. This is not surprising to me since my experience suggests there is plenty of room for boardroom improvement in most companies.

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